Last week’s UK trade numbers showed that in the ten months to October 2015 exports of goods were down around 2% compared with the same period in 2014. 2015 has not been an easy year for exporters, with sluggish growth in the eurozone and slowdown in China amongst the list of challenges.
All this means that the government’s export targets are looking increasingly difficult to meet. But that doesn’t mean we shouldn’t be aiming to them. Last week, EEF submitted our response to the BIS select committee inquiry into UKTI. We argue that the government’s export targets are important aims and should help ensure the whole of government is behind the exporting agenda.
Manufacturers see expanding their exports as a key way to boost growth amid challenging global economic conditions, and our Innovation Monitor survey earlier this year found that selling into new markets was one of manufacturers’ top reasons for innovating. But moving into new markets is one of the most challenging things manufacturers can do.
Key challenges include:
Understanding the market
- Managing risks
So what can government do?
1) Support companies of all sizes
In order for the government to get 100,000 more companies exporting, it will not just be SMEs who contribute to this target. There are opportunities to increase exporting in medium-sized and large companies too.
Looking at the proportion of companies that export, there is a plateau after companies get to a turnover of £10m. Large companies should not be forgotten as part of the support landscape as this could be a missed opportunity to boost exports and help meet both export targets.
2) A whole of government focus
The recent creation of an Export Taskforce focusing on a whole of government approach highlights the government’s commitment to boost exports. It is an important step towards ensuring all government departments are pulling in the same direction to support and encourage exporting. Government can work to look at global trends and opportunities and match these with UK capability in order to maximise exporting prospects for UK businesses.
The government must continue to act as a flag bearer for UK excellence and have an important role to play in marketing and branding the UK in overseas markets.
3) Working with partners
We must continue to work with our European Union colleagues in order to see key trade deals progress. Free trade agreements (FTAs) lead to lower tariffs and barriers to trade, such as agreements on product standards and customs procedures, and can significantly open up trade between signatory countries. As such, the UK’s relationship with the Europe Union plays a key role in helping to meet the export targets.
Completion of the EU single market and further moves towards harmonisation of standards will also help trade as EU standards drive action elsewhere in the world. This will make it easier for UK businesses to trade and reduce compliance costs and could be of particular benefit for service firms. This can be a significant cost for businesses, especially for SMEs, and progress towards harmonising these across both the EU and the world would be positive for UK businesses.
4) Ensure UKTI addresses the challenges companies face
EEF members regard UKTI as being fit for purpose to a large degree. It is important that government provides both a coordinating role and public funding to support companies exporting efforts and to promote UK capabilities in overseas markets.
EEF members have generally been consistent in their feedback of UKTI support in recent years. It has had a positive impact on their success in expanding into new markets and helped them achieve this more quickly than if support had been absent. This broadly tallies with the annual satisfaction surveys carried out on behalf of UKTI.
For manufacturers, maintaining the schemes that help them overcome the barriers they face – finding customers, understanding the market and managing risks – will be key. Feedback from EEF members particularly highlights the value of personal relationships with International Trade Advisers, the Overseas Market Introduction Service (OMIS), and trade missions.
There are however, some recurring issues that arise when talking to UKTI users. The first is the frequent restructuring which has taken place at UKTI, and secondly we do not have the same visibility about the effectiveness of all UKTI activities.
5) It’s not just about UKTI
Ultimately, increasing the UK’s exports will require more than just support from UKTI. It is the whole business environment that is important for companies. In order to successfully compete in export markets companies need to be able to innovate and invest for their overseas customers, and they also need to be able to access them. Therefore support for innovation, investment and infrastructure are crucial.
Export finance also has a role to play in de-risking international transactions, but this help cannot be one-off. UKEF’s focus should be expanded beyond supporting individual transactions to provide more campaign-based support that enables companies to grow their businesses in a sustainable way in new markets for the long-term.